8th June, 2007

8th June 2007
I arrived in Thailand at the start of 1996 to take up my job with Jardine Fleming full of enthusiasm and optimistic that after two years of underperformance the market was set to rebound strongly as the current account deficit seemed to be diminishing and interest rates were falling. How wrong can you be? To be fair on myself within six weeks of arriving, with the market rallying strongly, I had visited a load of companies and realized it was all a mirage. There was just no meat to the place. Companies raised money left right and centre borrowing cheaply overseas, ploughing the funds into ill considered investments with little regard to what return might be achieved or they just put the money they had raised into high interest bearing Baht deposits in the certain knowledge that the Baht was only going to appreciate. From that point we went on the offensive and, fending off bomb threats from irate private investors objecting to our bearish story, we pounded the table urging investors to sell sell sell……though I certainly did not anticipate that by the time I left Bangkok in April 1998 the SET would have fallen 90% in US$ terms during my tenure. It was a terrific if not particularly profitable experience.

Chris Wood, in his latest Greed & Fear, which is attached below portrays an appropriately cynical assessment of Thailand’s prospects. Appropriate in the sense that Thailand is certainly not out of the woods given all that yet has to be done to progress towards a new constitution and fresh elections. Also in the sense that even beyond that there are some enormous problems that Thailand needs to address, not least – at the risk of sounding incredibly patronizing – the enormous gap between the haves and the have nots both in economic and educational terms, things that simply have not changed a jot since my time in Thailand. But here’s my view, purely from a stock market perspective. There is not going to be any significant violence. The new constitution will be passed. Elections will proceed by the end of the year and the Democrats will end up with the Premiership ( whilst Thaksin will have to content himself with Man City…what a joke ) and a majority of Cabinet positions. All this is going to be very positive for the stock market and after that there will be another kicker when the new Ministers get on with the job of sorting out Thailand’s problems. Back in 1996 within days of arriving in Thailand, my first job was to write a speech for the then Minister of Finance, Dr. Surakiat Sathirathai, that he was due to present to potential foreign investors. It almost defies belief actually, but it is true. I wish I had kept a copy. It must have been dreadful! Yet he presented it, virtually word for word. Although I havn’t investigated this I suspect that the very doctor is one of the 111 executive committee members that has been banned from politics for five years.

The next Thai Finance Minister, I wouldn’t mind betting, will be my old boss, Korn Chatikavanij and when he and his contemparies get their mandate they will not be coming to some naïve 33 year old foreigner to write their story. He is extremely articulate and able. I’m not saying they will succeed in turning Thailand into an economic power-house, but they will give it a go and if politics can matter some times in markets, then you should be in there for the ride. I would follow Chris Wood down to Thailand, but even though he may accuse me of succumbing to spin, I would slip more than the 1% he has into your Asian regional portfolios. Banks, property and exporters.

No Bits & Pieces this week. Damian is on holidays….some people….what a life eh. I suppose I need to concede that the absence of a Bhodi Tree uttering last Friday was because that whilst I was in the office in body, I wasn’t really in spirit, the effect of a stag-party for one of my colleagues the evening before which took its toll. After that admission I can surely be allowed a little bit of self praise. For a change, I have remembered in time to be armed with a present and a card, that next Monday is my 19th wedding anniversary. The present, if I can rely on you not to spill the beans, is a lovely flowery hand shovel which Sophie will be able to use to pick up our new puppy’s messes and the card I thought was particularly apt given our rapid descent into bankruptcy following our house purchase. A picture of a happy looking couple with the caption, “Darren had decided not to report his stolen credit card since the thief was spending considerably less on it than his wife did”.